Correlation Between BrightView Holdings and Driven Brands

Can any of the company-specific risk be diversified away by investing in both BrightView Holdings and Driven Brands at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining BrightView Holdings and Driven Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BrightView Holdings and Driven Brands Holdings, you can compare the effects of market volatilities on BrightView Holdings and Driven Brands and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in BrightView Holdings with a short position of Driven Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of BrightView Holdings and Driven Brands.

Diversification Opportunities for BrightView Holdings and Driven Brands

0.85

Correlation Coefficient

BrightView Holdings  Driven Brands

Very poor diversification

The 3 months correlation between BrightView and Driven is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding BrightView Holdings and Driven Brands Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Driven Brands Holdings and BrightView Holdings is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on BrightView Holdings are associated (or correlated) with Driven Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Driven Brands Holdings has no effect on the direction of BrightView Holdings i.e., BrightView Holdings and Driven Brands go up and down completely randomly.

Pair Corralation between BrightView Holdings and Driven Brands

Allowing for the 90-day total investment horizon BrightView Holdings is expected to generate 0.92 times more return on investment than Driven Brands. However, BrightView Holdings is 1.09 times less risky than Driven Brands. It trades about 0.06 of its potential returns per unit of risk. Driven Brands Holdings is currently generating about -0.03 per unit of risk. If you would invest  823.00  in BrightView Holdings on July 1, 2024 and sell it today you would earn a total of  720.00  from holding BrightView Holdings or generate 87.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

BrightView Holdings  vs.  Driven Brands Holdings

BrightView Holdings

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BrightView Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, BrightView Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Driven Brands Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Driven Brands Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Driven Brands may actually be approaching a critical reversion point that can send shares even higher in October 2024.

Pair Trading with BrightView Holdings and Driven Brands

The main advantage of trading using opposite BrightView Holdings and Driven Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BrightView Holdings position performs unexpectedly, Driven Brands can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Driven Brands will offset losses from the drop in Driven Brands' long position.

The idea behind BrightView Holdings and Driven Brands Holdings pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.